Lenders such as banks and finance companies set different requirements for them to lend money to your business. Preparations and the application process also take different lengths of time. It has become increasingly difficult to get corporate loans through the bank. Here, it can be an advantage to prepare figures and data in advance. What do security, personal guarantee, credit information, and business plan mean for you who want to borrow for your company? Here we help you sort out the concepts. We hope this loan guide or långuide will help you get a business loan for your company.
Traditional business loan
This corporate loan is reminiscent of a private loan, with the difference that the loan amount is usually significantly larger, where some lenders can offer sums of up to SEK 6 million. The loan can be unsecured and consists of a fixed amount paid out monthly over a certain period and on which the company pays interest. The interest is part of the cost of the loan, and it is paid on an ongoing basis throughout the term of the loan. The interest rate level affects the market interest rate and any risk and security that the company has entered into. You can also influence the interest rate by choosing a variable or fixed interest rate. The variable follows the market interest rate level, and the fixed one protects companies against fluctuations in the market interest rate. In addition to the interest, the loan itself must be repaid, which is usually done through repayments.
Lenders usually approve all company types and lend first and foremost to established businesses, although start-ups can also get loans. The company must generally be covered by a turnover requirement of approximately SEK 50,000 per month or SEK 600,000 per year. More requirements for obtaining this type of loan are that the company must be active, registered in Sweden and that the applicant must have a senior position in the company. Sometimes there may also be a requirement for the owner to be resident in Sweden. Even if most corporate loans for sums up to SEK 500,000 are granted without security, some lenders may require security in the form that you as the founder need to go on personal bail, which means that you are liable to pay if your company can not repay.
Business loans with security
It is common for banks and finance companies to require some form of security to lend money to companies. It can be your company’s assets such as property, equipment, or fixtures and fittings. For example, if you borrow money from a factoring company, the security is instead your customer invoices. Personal assets such as your home or holiday home can also serve as security. Always ask what applies when you leave security. Think about what consequences this could have for your company and your finances.
Borrow to the company with a personal guarantee
Banks and finance companies can request a personal guarantee to grant your loan. The person who has signed the guarantee will be responsible for repayment if you cannot repay the loan. Anyone can go on bail, but it is most common for those who run the company. Borrowing to the company with a personal guarantee means that you confuse your company’s finances with your private finances. Think about what it can mean for your finances.
A sound business plan is often an essential requirement
Both banks and some lenders want to see a business plan to allow your business to borrow money. If your business does not have a business plan, there are templates online that you can use. The bank will look at your company’s business concept, personal experience, industry, and business risks. Tell us what sets you apart from your competitors, how you plan to market your business and how you will make money.
Requirements for forecast and budget
The bank will always want to see a budget and forecasts for your future results. Spend a lot of time on this. It is essential that the budget is perceived as realistic and based on the current situation. For example, if you run an established company, the bank will want to see financial statements and balance sheets. If you are applying for a loan to deal with an uneven flow of money, you need to show when the sale is taking place and when the revenue is coming.
All lenders take credit information before granting loans to entrepreneurs but handle the data in different ways. For example, personal payment remarks are an obstacle to getting a business loan with some finance companies. Lenders can also look at your company’s payment behavior and if you tend to pay invoices late.